That's what Chris Green, principal technology analyst at Davies Murphy Group Europe, claimed toBBC News. While he says that Microsoft Corp. (MSFT) may never pull the trigger and release the device, he explains, "Microsoft is hedging its bets. The firm is heavily invested in Nokia succeeding with its Windows Phone handsets but can't allow for its failure to torpedo the platform. At the very least Microsoft will be developing its own handset to go to market in case Nokia and others don't do better."

But Microsoft CEO Steve Ballmer tells BBC News that his company won't shy away from trying to "set a new standard" in hardware markets where it sees its partners struggling. He comments, "Is it fair to say we're going to do more hardware? Obviously we are... Where we see important opportunities to set a new standard, yeah we'll dive in."

"We have committed ourselves on a path where we will do whatever is required from both a hardware and a software innovation perspective and the cloud innovation perspective in order to propel the vision that we have."

II. Microsoft Entrance Scares Some Struggling OEMs

The promise of Microsoft "diving in" is alarming to some OEMs. Taiwan's Acer, Inc. (TPE:2353) "warned" Microsoft to reconsider the Surface tablet. In an interview its CEO JT Wang commented, "We have said [to Microsoft] think it over. Think twice. It will create a huge negative impact for the ecosystem and other brands may take a negative reaction. It is not something you are good at so please think twice."

But Acer is not exactly the most self-assured PC maker out there. Mr. Wang described the build quality of his company's own products last year as "cheap", bemoaning how "unprofitable" his firm was.

More confident firms seem less worried about Surface phones or tablets.

Dell, Inc. (DELL) VP Kirk Schell views the Surfaces as an opportunity to introduce customers to the promise of Windows 8, which will in turn drive his company's sales. He remarks, "The announcement of Surface was necessary to have a proof of concept and to get people excited about what was coming to push application development and create some buzz out there. They've invested so much in Windows 8 it was important to make it work, so I felt Surface was the logical thing to do."

III. Nokia on Surface Phone: "Great!"

When asked about the prospect of a surface phone, former Microsoft Canada executive Stephen Elop -- now the CEO of Nokia Oyj. (HEX:NOK1V) -- offered praise for the idea. He commented, "[It would be] a stimulant to the ecosystem."

It's possible Microsoft could partner with a third party to produce its vision in the form of Microsoft-branded hardware; if so Nokia would likely be a leading candidate. That's the approach Google Inc. (GOOG) -- like Microsoft, a software company at its roots -- used to promote Android tablets/smartphones, via its Google-branded"Nexus"devices.

But it's possible that Microsoft will simply design the devices on its own. As it has shown with the Surface tablet and the Xbox/Xbox 360, Microsoft has evolved into a company thoroughly capable of producing its own intriguing third party hardware.

Microsoft isn't looking to leave its treasured OEM partners behind. In fact much of its own Surface tablet launch event was dedicated to promoting its OEM's Windows 8 designs, designs which are technically rival's of the event's star attraction. Talking about Windows 8 and Surface Mr. Ballmer stated, "This is one of two or three big moments in Microsoft's history."

Steve Ballmer called the launch of Windows 8/Surface a top moment in Microsoft's history. [Image Source: Getty Images]

Big indeed, but Microsoft isn't looking to usurp its partner OEMs quite yet, although it's clearly unafraid to give them a friendly push.

quote: Consider Apple has managed to SUE or anger just about every company they work with at some point it will come back to haunt them.

Dream on.

Try to think like a fully mature adult. This is the world of global business and it involves hundreds of billions of dollars. This is not a pissing contest between adolescents. Apple's supply chain is vast, it involves thousands of companies and Apple make purchases approaching a value of a hundred billion dollars per year. Apple are generally acknowledged as having the best organised and managed supply chain on the planet. Nothing will stop thousands of companies queuing up to join that gravy train.

The notion that Apple will be brought down in some sort of Jujutsu move arising from the bad karma that it has generated is a recurring fantasy amongst iPhobes. It is never going to happen. The only way Apple will be beaten is if other companies make products that prove more popular and more profitable than Apple's and thus erode Apple's business. There is no sign of that happening and you know in your own heart what a remote possibility that is - hence the need for a feel good daydream about Apple being 'haunted'.

Korea Times says that Samsung is no longer satisfied with the “huge price discounts” that Apple is demanding. The price per pixel has more than halved from the iPad 2 to the iPad 3, and Samsung is not happy about it. The Cupertino-based company is well-known throughout the industry for its hard bargaining tactics, which Apple is able to use due to its huge volumes and clout.

To replace the lost business from Apple, Samsung Display will reportedly sell more panels to the handset division of Samsung Electronics (its sister company) and Amazon.

so, that is just Samsung. Samsung may be a major player, but they are far from being the only player. Apple still has a long way to go before it pisses everyone off. By the time they get to the point of no return, they will most likely have mended fences with some of the first ones. It is the cycle of the industry.

Samsung and Apple are getting a divorce. So what? That's been obvious for quite a while now. When the dust settles and the divorce is finalised what will things look like?

Apple - business as usual.

Samsung - minus it's largest customer

Apple have been ramping up the scale of their business at a very high rate for several years, doubling iPhone production every year, as well as adding new product lines like the iPad. They can do this by managing a very forward looking supply chain strategy and the 100 billion bucks they have in the bank helps.

Dreaming that somehow lots of other companies will get together to ruin their own businesses and make a lot less profit just so they can make life difficult for Apple in order to make a few obsessed iPhobes happy is a fantasy of megalomaniac proportions.

What big boys really do when they have large cash reserves is BUY companies.

Samsung/Google/Apple/Microsoft have enough cash that they could start buying companies that would impede the others.

Microsoft is well known for buying companies its smart for either products or patent portfolios.

Intel has even done it buying a wafer manufacturer.

Google hasn't been smart enough to do it up front instead they blame other companies and the patent system. Buying Motorola kept them from being out of the smartphone business. Its why they also pay so much in royalties.

Samsung doesn't need to but they can.

Apple isnt known to they like to steal.

A lot can change and happen if you have cash and use to against your competition.

Honestly, I'm happy the developers have to actually demonstrate good faith with a miniscule payment to develop on a solid system created by a reputable software company that recently just proved they are also an amazing hardware company.

The worl would be a LOT better without gay porn viruses and trojans and the like and this goes in a HUGE step forward towards acheiving that.

I for one am (for once) willing to sacrifice a little in that sense for HUGE gains in terms of safety of applications.

It's a no brainer for the next generation of software. Will it remain that way? Perhaps not, but its worth doing. Apple has done so with great success and its platform benefits as a result. Its users do not worry about the source of an app before downoading it.

I sit on the opposite side of the fence i guess closing off an OS and platform seems to limit its flexibility and scalability. I hope this doesn't filter down to the server environments; I want the best solution for any given problem i don't want to be gated into a solution like so many cattle at a slaughter house.

It's not that I'm against it being open, I just think if it ends up hurting the eco system rather than helping it I'm sure that requirement will change. I'm willing to try and see though. Managed to buy Win8 Pro for $15 so for that price, It's all value lol

They want to set a standard, not become the best seller via low margins and drive OEMs out of business. The Fire and Nexus 7 have basically made the Android tablet market not worth participating in anymore (not that it was all rosy before, but now it's suicidal) unless you're a company that's happy carving out a small niche.

As much as we want to think customers have been itching for high build quality, they will mostly still choose by price (aside from Apple fans), but at least MS can create a reasonably priced halo product to run Windows to show what's possible.

Except that its display and internal hardware are nowhere near an iPad at the same price. Hell, other Android tablets at the same price also have higher res screens. The Surface chassis and such are good but at that price it doesn't make sense compared to other $500 tablets.

I agree that it is a good thing that Microsoft isn't racing to the bottom with low margin tablets that cut corners, but unfortunately is isn't all the way there yet. It is not a value proposition, nor is it one for quality either, at least not until the beef up the specs. Maybe with the next version.

Other than screen res, every single review that wasn't by an Apple of Android fan (yes I know, hard to beleive) said the screen is better in many ways and in general is quite comparable to the iPad. Saying its nowhere nead an iPad isn't really telling the truth.

Unless, you went hands on and came away with your own impression. If so, I'd be interested to hear.

And yes, the iPad mini has a little lower pixel density than the Nexus 7, but the faster hardware and developer support more than make up for it. I don't much care either way, I prefer the larger tablets.

And how does the iPad mini have faster hardware than the Nexus 7?iPad mini - Dual-core A5 processor at 1gz with 512 mgs ram.Nexus 7 - NVIDIA Tegra 3 4-PLUS-1 quad-core processor with a 5th battery-saver core at 1.4 ghz and 1 gb ram.Apple having the better developer support I will agree with, but it not that big a gap anymore. If you already have a iPhone or iPad, get the iPad mini because you already have the software. Anybody else should be getting the Nexus 7. The Nexus 7 will also have 32 gb flash for $249 vs 16 gb flash on the iPad mini for $329.

I should have been more clear since I took the GPU into account. You're right about CPU performance, there's a 10%-20% difference in Sunspider and BrowserMark performance. Taking the GPU into account there is over a 50% difference in performance.

As for there not being that a big gap in tablet apps, I disagree. A gap exists with phones, but it is manageable. Many popular apps are cross platform, and even when the equivalent version of something specific is lower quality than what is on iOS it can generally be found. The gap with tablets is more severe given that Andy Rubin has a fundamental disagreement with tablet and phone apps being two different things.

Rubin actively dislikes the idea of having tablet specific apps. The result of that policy combined with lower tablet hardware sales and lower profitability for developers is that many Android tablet apps are simply rescaled Android phone apps. There is a big difference between that and something that is designed and laid out specifically for a tablet.

Tablets are app machines, and when the vast majority of apps don't take advantage of that big screen I consider that a major problem, especially when it is the purposeful result of a misguided policy. The result is that there are numerous creative and content apps on the iPad that may not ever have an Android equivalent, not when there is so little incentive for developers to optimize.

As for price, I don't like it either way. I don't care for the iPad Mini, and other 7" tablets simply aren't for me due to their size and functional limitations, so I can't give a good opinion. A 10" iPad and a Kindle Paperwhite is a combo that works well for me.

This is a chance for 3rd party companies to show they can still develop quality hardware and really have some engineers show off their stuff.

With Microsoft making hardware the bar has been set. Kind of whats happened in the PC area where there is a lot of pretty boxes filled with mediocre parts as they aim for thin profit lines trying to undercut each other.

Im sure at some point were going to see them trying to shave dollars off where possible and the cheap Windows tablet war will begin.

Not for a long time, because idiots keep egging them on with things like "Kind of whats happened in the PC area where there is a lot of pretty boxes filled with mediocre parts as they aim for thin profit lines trying to undercut each other."

$10 says people will be confused as well as upset when the $199 tablet vanishes in a couple years.

Mainly hardware. Apps and media are not profit centers for any of these companies. They add value to the ecosystem, thus helping to buy hardware, but hardware is where the profit lies.

Everyone has similar payouts to developers, record companies, movie studios, etc etc, and the profit margins really aren't there. iTunes and the App Store is the least profitable part of Apple's business. Music and app stores make almost nothing for Microsoft and Amazon.

Profit is in the hardware, period. Amazon is unique in the tech world because they are willing to take on 1% profit margins on their business.

Of course Microsoft doesn't make money on it's App or Music store. It simply doesn't have the volume to break even.

As for Apple not making money. It charges 30%. I'm sure that more than covers it's expenses. Given the volume of paid apps it sold last year, only a complete and utter numpty would claim they don't make any money from Apps.

As for Amazon not making money from Music or Apps, sure.

Just sure mate.

Hardware becomes a commodity eventually. Something even Apple will struggle to overcome.

Apple makes 30% on apps and even less on movies and music. Their overall profit margin on iTunes is closer to 10% with movies and music, which are the same rates that Amazon and Microsoft makes.

Everyone pays similar wholesale prices for media and has similar payouts for developers.

Out of that profit comes the cost of running the service and things like bandwidth and storage costs. When all said and done this sort of thing has a little less than 10% profit for all of these companies.

The exception are companies that compete with brick and mortar retail distribution. Valve's cut for Steam slides anywhere from 30% to 70%, much higher than what Apple/MS/Amazon get, but again it is competing with full retail titles sold at B&M stores.

If you really don't believe me, here is a breakdown of where Apple's profit lies. The yellow wedge is from iTunes/App Store. Also note that Amazon and Microsoft make similar profit margins selling media and mobile applications: http://cdn.macrumors.com/article-new/2012/10/Scree...

I'll say it again, movies, music, and mobile apps are not a direct profit center. Amazon is giving away hardware to make very little on media. Their profit is at around 1% while their stock PE is at around a stratospheric 300. Amazon is clearly not interested in the profit margins that other techs make, and I wonder when investors will finally accept that and price the stock accordingly.

I'll take that bet. There's no reason for it to dissapear. Google can seemingly afford to sell at cost since ift profits on ads and statistics of your use of its OS (essentially also towards ads) as can seemingly Amazon.

Its interesting that Amazon chose to release an app for Win8 though. Maybe they aren't interested in their custom OS for the long haul. I certainly wouldn't be...

However, no one will be confused or upset because if they were paying attention to such a thing they'd be extremely well informed about the market and thus confusion wouldn't likely promote itself.

Fat chance, OEMs will continue to cut corners on hardware like they have for over a decade. It is sad but I cannot blame Microsoft for taking things into their own hands. The main thing selling Windows short hasn't been Windows, it has been shoddy laptops made by their hardware partners. I think they saw the same thing happening with tablets so they took charge.

quote: Microsoft (MSFT) development director Craig Mundie knows that his company has fallen way behind on smartphones but he insists that it’s not the company’s fault. In an interview with Spiegel, Mundie says that Microsoft would have had a lot more time to focus on developing and promoting mobile computing devices such as smartphones if it weren’t for those meddling cyber criminals.

“During [the time that Apple was building the iPhone], Windows went through a difficult period where we had to shift a huge amount of our focus to security engineering,” said Mundie. “The criminal activity in cyberspace was growing dramatically ten years ago, and Microsoft was basically the only company that had enough volume for it to be a target. In part because of that, Windows Vista took a long time to be born.”

Poor old Microsoft. So busy running around chasing bad guys and making the world safe that they forgot how to run a tech company. Of course the reason they are running around chasing bad guys is that they sold a POS operating system full of ridiculous security holes for many years and single handily created a viable cyber crime underworld. Oh well, accidents happen.

Problem is Microsoft is not a police agency run by Eliot Ness, it's supposed to be a tech company but it's run by dopey Uncle Fester. Do you remember this?

Meanwhile Microsoft stumbles forward, carried by it's size and inertia, lumbering towards where the puck once was, except the pucks long gone and what awaits is just a big hole in the ice and a lot of cold deep water.

Surface launch day came and went in the absurd Microsoft 'Apple Store' clones and the after a flurry of visitors the tumbleweed is back.

Other than the fact that this counts as the biggest understatement of all time, I guess Uncle Fester also decided not to do anything about the iPhone too quickly. One wouldn't want to rush would one.

Uncle Fester says all is well in the House of Microsoft. Some believe him.

Personally I find all the desperate manoeuvres at Microsoft a form of high entertainment that can hardly be matched, it's like watching a blind man you dislike wandering near the edge of a cliff, will he fall or will he by chance stumble to safety? Only time will tell, meanwhile grab some popcorn.

The videos are part of a series of blog entries reporting on Brent Ozar's blog Technically Funny. Worth a read. This guy has technical knowhow (read some of his bio' info) so one can only wonder what an average consumer will make of all this.

The Surface hasn't properly linked with his Windows Live account. This happened to me on the Release Candidate and I had similar issues. He simply needs to reset to factory defaults and start again. Gathering from his inability to sign in properly that shouldn't be much of a loss.

To be more specific, there are two tpyes of user management with Windows 8/RT. You can create local user accounts on the system, or you can use your Windows Live account to log in.

This issue specifically appears to happen when a local user account has initially been created, but later the user assigns a Windows Live account to log into the OS. This is a relatively rare scenario, not a typical usage experience as you would like to imagine. This is likely as a result of this being a new method of logging into Windows, it obviously has some flaws which will be ironed out.

Nevertheless, this was obviously a cherry picking from yourself. It obviously makes you feel better knowing that someone is having problems with the Surface. It would be just as easy for me to find hundreds of videos showing flaws within iOS, but what would be the point? I don't need that to make myself feel better, or to grind on other people, which is clearly your intention, isn't it? To be an annoying little cretin? Anything made by humans will have flaws.

There's a lot of talk about failure rate of MS products - plenty referring to the X-Box 360.

While numbers are nice to see, what I recall from personal experience is that both the PS3 and X-Box 360 had significant manufacturing defects (YLOD and RROD). My PS3 (Fat) actually EXPLODED about an hour after it got YLOD (to be fair I was messing with it a lot trying to get it to work when it got YLOD and YLOD was not a commonly used / established acronym at that time).

Both Sony and Microsoft allowed you to send in your units to get them fixed / replaced (I assume they still do?).

My point is, manufacturing quality among Microsoft's main and only direct console competitor (Sony) seemed to be about the same. So why bash Microsoft's build quality when Sony's was the same?

I guess you could mention the failure rate of the Wii, but that's kind of like comparing a T-9 flip phone to a smart phone.

Failure rate for launch consoles was much higher than 33%. It was 33% over the lifespan of the product, brought down over the long term because they finally fixed the issues years later. Any of the earlier models had over a 50% chance of failing within the extended warranty period, that is unusually high for any piece of consumer electronics. I myself had two 360s fail. One or two is pretty standard among people I know. A friend of mine had six fail.

It does make a good source of income for the indie game store by me, they still make money repairing RROD 360s (piles of them in the back).

That said, Microsoft's failure with XBox reliability certainly won't carry over to their tablets, phones, and whatever else they decide to make. The Zune HD was a solid device, as are other products they make. It is a huge stretch to say that because the XBox was super faulty, that it will carry over to their other products.

Initial fail as reported by MS was 3-5% (i doubt this is accurate though, too low)Unofficial fail rate for INITIAL xbox 360 version was reported at 30% (by anonymous 'inside source' , so I doubt accuracy of this also, too high)Public info by 3rd party, for mid 2007 fail rate was estimated at 16% (this one is more believable, and also initial models of xbox were sold by mid 2007)Estimate also from 3rd party for 2009 version was 4%.I can only assume later models had even lower fail rate.

Even if 30% fail rate was true for initial version, only 12M units were sold by mid 2007. And about 68M units were sold total by now. So average fail rate would be under 10% over 7 years.

With more believable 16% fail rate for early systems and 4% for later, average fail rate would be just 6% .

Pick and choose from your survey of choice and they'll have wildly different results.

Microsoft's rate of 3%-5% clearly cannot be trusted.

A 2010 survey I read of 500000 people (quite a big sample size) put failure rate at 42%. Clearly the bulk of failures were from the first couple years and the rate reduced as time went on, but it cannot be overstated how faulty the 360 was over the first several years.

Also, 3%-5% is on the high end of standard failure rates for a piece of consumer electronics, yet you don't hear anything on the epidemic scale of 360 failure among things like smartphones or hard drives (not counting the old IBM DeathStar, which WAS very high at about 30%-40%, or OCZ Vertex 2 SSDs at around 10%), and all of those things have high end failure/return rates of about that much.

To believe that it is at only 6% when so much evidence through both independent research and anecdotal evidence says otherwise is strange.

And to be clear because this thread has been so derailed, I think worrying about the quality of the Surface because of the XBox is ridiculous. There is no reason to think that XBox levels of hardware failure is going to affect the Surface. They learned their lesson, plus there is plenty of other MS hardware that has worked fine for years (Zune HD, etc)

You act like the Xbox 360 is Microsoft's first console or hardware device. What was the failure rate of the original Xbox?

The RROD was an unfortunate incident due to using lead-free solder on the original motherboards. When the temperature of the motherboard got hot enough, the joints failed and the GPU came unseated. MS mitigated this on refurbs by using an X clamp heatsink to keep the chip seated.

How many Playstation consoles had to be turned upside down just to read the disks?

You are a friggin moron. The original xbox 360 was designed in 2003, 10 years ago. I would much rather buy a product from a company who had a hardware issue, and owned it by extending the warranty, cutting checks for people who paid for repairs, and revamped the product to fix the issue, than the company who hasn't had that happen to them yet. Or worse the company that blames the problem on you (aka Apple). The xbox 360 RROD was something MS learned a few things from.

You don't understand hardware or this market. Microsoft screwed a lot of people with their shoddy XBOX build quality and overheating issues. A lot of people. Apple at least stands behind their hardware. I won't buy an Apple product, but I know folks who do, and they've all received spectacular hardware support, up to and including free replacement of the product with a newer better model, even after the warranty has expired. I've never seen a company take such good care of its hardware customers as Apple.

Microsoft replaced my xbox because it scratched my disc when I accidently moved it.

They didn't screw me over for something that was likely my fault. So, who are you even advocating for? I know of no one that was denied repairs unless they were at fault and even when I was at fault they replaced it free anyways.

I'm saying Microsoft is a greedy corporate machine who screws the consumer, by locking them into a closed proprietary ecosystem.

I'm also saying Apple is a greedy corporate machine who screws the consumer, by locking them into a closed proprietary ecosystem.

But from a hardware support perspective, at least from what I've witnessed, Apple takes their hardware customers a lot more seriously than Microsoft does, and really bends over backwards to make them happy. Neither will get a dime from me however.